Is The Trans-Pacific Partnership Agreement (TPPA) Good For Malaysia?

Malaysia is all set to be part of the world’s largest trade pact after the Senate gave the green light for the country to join the controversial Trans-Pacific Partnership Agreement (TPPA) in late January.

The Upper House (Dewan Negara) had approved the motion to back Malaysia’s participation in the TPPA in a recent meeting held in Kuala Lumpur. A similar motion was approved by the Dewan Rakyat late last month after a two-day sitting.

So what is TPPA exactly and why is everyone losing their minds over it?

So, what exactly is the TPPA? The TPPA is a proposed regional regulatory and investment treaty aimed at creating a platform for economic integration across the Asia Pacific region.

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The proposed agreement originated in 2005 as the Trans-Pacific Strategic Economic Partnership Agreement (TPSEP or P4), and included just New Zealand, Chile, Singapore and Brunei.

It was the United States’ (US) participation and its subsequent dominant role in the negotiations of the partnership that resulted in the expansion of its membership, as well as having a primary role in its agenda setting.

TPPA Malaysia: How does it affect us?

Malaysia joined the TPPA in 2010 and is expected to increase its GDP by 5.6% and also its export by 11.9% by year 2025.

The industries most likely to benefit from the pact are textiles, apparel, commodities and electronics.

However, there are a few concerns raised over TPPA, such as:

Higher medical costs

As the TPPA plans to introduce tighter rules for copyright to protect intellectual properties, this could mean monopoly for pharmaceutical companies that currently hold drug patents. As a result drug prices will be locked in high, and inadvertently block cheaper, generic versions from entering the market.

Consumers will have to take advantage of banking products like credit cards to manage their cost, such as one that will give cashback on pharmacy’s spending.

This will make access to lifesaving medication much harder and for people in developing countries in the TPPA (including Malaysia), denying consumers access to HIV/AIDS, tuberculosis and cancer drugs could be deadly.

Members of the Malaysian AIDS Council and HIV-positive patients protested early last year, claiming that the cost of treatment drugs could go up from RM500 – RM600, to almost RM3,600 per month if the TPPA happens.

However, according to the Malaysian Organisation of Pharmaceutical Industries (Mopi), prices of medicines are more heavily affected by foreign exchange rates and current economic challenges, than with the TPPA.

The organisation’s president Diong Sing Peng, told The Star in a January interview that the TPPA’s impact on the local pharmaceutical industry has not been significant so far.

Mopi represents all the major pharmaceutical companies that produce generic and biosimilar medicines locally.

How about SMEs?

The removal of tariffs could mean local producers and farmers now have to compete with tariff-free imports from other TPP countries.

On the other hand, provisions under the TPP could also make it easier for SMEs to gain access to foreign markets and to operate across the region, so things could go either way for these industries.

The international trade and industries minister, Datuk Seri Mustapa Mohamed is optimistic that the trade pact would be a boon for local SMEs, saying that it will increase exports as local SMEs will have access to a new and wider market with other members of the TPPA.

He added that operation costs for SMEs will also be less due to the decreased import duty, which will lower the cost of importing raw goods.

“From the aspect of government procurement, Bumiputera companies and SMEs will continue to be prioritised,” Datuk Seri Mustapa Mohamed was quoted saying at the tabling of the TPPA motion.

“Malaysian SME suppliers will be given the chance to enter the state government procurement market – food products, cooking oil products, cloths, rubber gloves and automotive components,” he added.

The local government could lose out

If enacted, the TPP would support multinational corporations (MNCs) and give them the power to undermine policies and priorities on national and local levels.

What this means is that MNCs can expect no local condition or regulation changes affecting them when they reside in a partner country. For example, if Malaysia suddenly finds out that a certain ingredient in tobacco is harmful, and decide to ban it and thereby affecting the profitability of a tobacco MNC, the MNC has the right to sue the government for potential profit loss for the remaining period of their permit in the country, with interest.

The same could happen if Malaysia decides to be more stringent with LYNAS in the future.

To put this to the extreme, legislators and the Parliament may well be relegated to enacting only laws that will not affect MNC’s profitability and business viability.

However, Datuk Seri Mustapa assured Malaysians that the government will not change its vital policies, especially in regard to matters pertaining to bumiputera and matters that could not be changed as enshrined in the Federal Constitution after the TPPA is signed.

The TPPA will be signed in New Zealand on February 4, 2016. After the TPPA is signed, it can be reviewed within three years after being ratified, Datuk Seri Mustapa said.